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China Review. Chinese Proverb: When we have nothing to worry about we are not doing much, and not doing much may supply us with plenty of future worries. GDP Comparisons as of 2012. Economy of China. second largest economy fastest growing consumer market in the world

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china review
China Review

Chinese Proverb: When we have nothing to worry about we are not doing much, and not doing much may supply us with plenty of future worries.

economy of china
Economy of China
  • second largest economy
  • fastest growing consumer market in the world
  • largest exporter and second largest importer of goods in the world
  • largest manufacturing economy in the world
  • AEAN–China Free Trade Area came into effect on 1 January 2010. China-Switzerland FTA is China's first FTA with a major European economy.
  • Most of China's economic growth is created from Special Economic Zones of the People's Republic of China that spread successful economic experiences to other areas.
  • Source: Wikipedia, CIA Fact Book
  • The renminbi ("people's currency") is the currency of China, denominated as the Yuan. The renminbi is issued by the People's Bank of China, the monetary authority of China
  • The renminbi is held in a floating exchange-rate system managed primarily against a basket of currencies and is allowed to fluctuate at a daily rate of up to half a percent
  • Since the late-2000s, China has sought to internationalize the renminbi. As of 2013, the RMB is the 8th most widely traded currency in the world
  • China became the world’s biggest trader in goods for the first time in 2013 valued at $ 4.16 trillion, a 7.6% increase over 2012.
state owned enterprises
State-owned Enterprises
  • As of 2014, large state-owned enterprises (SOEs) produceover 50% of the nation's goods and services, and employing over half of China's workers.
  • Sixty-five of the Chinese companies in the 2012 Fortune Global 500 list were state-owned, including State Grid Corporation of China, which operates the country's power grid, and oil companies China National Petroleum Corporation and Sinopec. Profits of the largest state-owned enterprises were much greater than the largest firms in the private sector, which were largely small- and medium-sized businesses.
  • Reform efforts, spurred by problems with corruption at some firms, were focused on splitting state-owned firms or creating competing state-owned firms—rather than privatization, which is politically unacceptable to the ruling party. Firms attempting to maintain their position, such as the State Grid, pointed out the advantages of monopoly, using incidents such as the 2012 India blackouts as examples of disorganization.
  • The largest state-owned enterprises have hundreds of thousands of employees and compete on a global level. Some have monopolies over national utilities such as electric transmission or mobile phone communication and have the power to set high prices and garner high profits. They hire the children of government officials and prominent party members and thus place senior Chinese leaders in a compromised position.
  • As of 2013 their access to low-interest loans from state-owned banks and their position of power was the subject of public comment and official inquiry.
financial banking system
Financial & Banking System
  • The People's Bank of China (PBC) and the Ministry of Finance, both under the authority of the State Council act as central bank.The People's Bank of China replaced the Central Bank of China in 1950 and gradually took over private banks.
  • PBC issues the currency, controls circulation, manages int’l tradeand plays an important role in disbursing budgetary expenditures.
  • Bank of China (BOC) manages remittances by overseas
  • China Development Bank (CDB) funds economic development and directs foreign investment
  • Agricultural Bank of China (ABC)provides for the agricultural sector
  • China Construction Bank (CCB)is responsible for capitalizing a portion of overall investment and for providing capital funds for certain industrial and construction enterprises
  • Industrial and Commercial Bank of China (ICBC) conducts ordinary commercial transactions and acts as a savings bank for the public
  • China is the world's largest producer and consumer of agricultural products – and some 300 million Chinese farm workers are in the industry, mostly laboring on pieces of land about the size of U.S farms.
  • Virtually all arable land is used for food crops.
  • China is the world's largest producer of rice and is among the principal sources of wheat, corn (maize), tobacco, soybeans, potatoes, sorghum, peanuts, tea, millet, barley, oilseed, pork, and fish.
  • Major non-food crops, including cotton, other fibers, and oilseeds, furnish China with a small proportion of its foreign trade revenue. Agricultural exports, such as vegetables and fruits, fish and shellfish, grain and meat products, are exported to Hong Kong.
  • Yields are high because of intensive cultivation: China's cropland area is only 75% of the U.S. total, but China still produces about 30% more crops and livestock than the United States (notwithstanding the State of California, which out-produces even the most productive Chinese farmlands by a three to one ratio).
  • Nearly one-fifth of farmland in China, and about one-sixth of all land in the country, is polluted. Some of the main pollutants are cadmium, nickel and arsenic.
  • Pollution is one of the most politically sensitive issues in China, with rising discontent among citizens at the degradation of the environment and at the corruption and lack of transparency that make the problem hard to solve.
Last January, horse DNA was found in a number of hamburgers for sale in Britain and Ireland, with one sample burger tested by Irish authorities turning out to be 29% horse. That touched off a multi-month scandal in Europe, as additional tests found horse DNA in about 5% of beef samples across the region. Tens of millions of burgers and beef products across Europe were withdrawn, although it’s still not clear whether suppliers knowingly used cheaper horse meat to adulterate their beef, or whether the contamination happened by accident.
  • Last May Chinese authorities arrested nearly 1,000 people for “meat-related offenses,” including a gang that made millions of dollars passing off fox, mink and rat meat as more expensive lamb. Another group of suspects produced fake beef and lamb jerky from duck.
  • Last February, the environmental non-profit group Oceana tested fish taken from around the U.S. and found that about a third of the samples were mislabeled. Between one-fifth to more than one-third of the supposed halibut, grouper, cod and Chilean sea bass samples were something other than what they were said to be, with cheaper fish replacing more expensive varieties. Only seven of the 120 samples advertised as red snapper were actually red snapper.
  • 80% of all power is generated from fossil fuel at thermal plants, of which
    • 70-75% coal (production down 25% due to environmental concerns)
    • 3% natural gas
    • 3% oil (China is a net importer of oil)
  • 17% hydroelectric
  • 2%nuclear energy, mainly from plants located in Guangdong and Zhejiang.
  • Rich overall energy potential is far from users and needs development
    • the northeast is rich in coal and oil,
    • the central part of north China has abundant coal, and
    • the southwest has immense hydroelectric potential
  • China is developing oil imports from Central Asia and has invested in Kazakhstani oil fields.
  • Development of renewable energy sources and increased attention to environmental protection. Guidelines called for a 20% reduction in energy consumption per unit of GDP by 2010. Moving away from coal towards cleaner energy sources including oil, natural gas, renewable energy, and nuclear power is an important component of China's development program. Beijing also intends to continue to improve energy efficiency and promote the use of clean coal technology. China has abundant hydroelectric resources; the Three Gorges Dam, for example, has a total capacity of 18 gigawatts . In addition, the share of electricity generated by nuclear power is projected to grow to 5% in 2030. China's renewable energy law, which went into effect in 2006, calls for 10% of its energy to come from renewable energy sources by 2020. Currently already 9% is derived from renewable sources.
metals and non metals
Metals and Non-metals
  • Iron ore reserves are found in most provinces, including Hainan. Gansu, Guizhou, southern Sichuan, and Guangdong provinces have rich deposits. The largest mined reserves are located north of the Yangtze River and supply neighboring iron and steel enterprises.
  • With the exception of nickel, chromium, and cobalt, China is well supplied with ferroalloys and manganese. Reserves of tungsten are also known to be fairly large.
  • Copper resources are moderate, and high-quality ore is present only in a few deposits. Discoveries have been reported from Ningxia.
  • Lead and zinc are available, and bauxite resources are thought to be plentiful. China's antimony reserves are the largest in the world.
  • Tin resources are plentiful, and there are fairly rich deposits of gold. China is the world's fifth largest producer of gold and in the early 21st century became an important producer and exporter of rare metals needed in high-technology industries. The rare earth reserves at the Bayan Obi mine in Inner Mongolia are thought to be the largest in any single location in the world.
  • China also produces a fairly wide range of nonmetallic minerals. One of the most important of these is salt, which is derived from coastal evaporation sites in Jiangsu, Hebei, Shandong, and Liaoning, as well as from extensive salt fields in Sichuan, Ningxia, and the Qaidam Basin.
  • There are important deposits of phosphate rock in a number of areas. Pyrites occur in several places; Liaoning, Hebei, Shandong, and Shanxi have the most important deposits.
  • China also has large resources of fluorite (fluorspar), gypsum, asbestos, and cement.

Given the size of China’s economy and status as largest trader of goods in the world, we seek increased opportunities to expand trade-related business to and from the Chinese markets. Expanding trade business with China represents an acceptable credit risk due to the short-term, self-liquidating nature of the credit facilities. Additionally, we believe China represents acceptable country risk especially within the context of the trade related business:

  • 2nd largest economy in the world
  • Low debt to GDP ratio
  • World’s largest trader in goods
  • Consistently positive current account
  • The government is pursuing a controlled, methodical liberalization of the currency
  • The government has started to tackle pollution and corruption, the two major sources of the population's discontent